Dubai aims to reduce spending next year

The emirate is cutting spending in its projected budget for next year as part of an effort to streamline operations.

Dubai's budget outlines large outlays on infrastructure and transport. Above, Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, at a metro station in Dubai. Karim Sahib / AFP

The Dubai Government aims to cut its spending by 4.5 per cent next year as part of a long-running effort to streamline operations while continuing to invest in infrastructure.

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A budget approved yesterday by Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, called for Dh32.26 billion (US$8.78bn) of government spending next year against anticipated revenues of Dh30.4bn, resulting in a projected Dh1.8bn deficit.

That spending was about Dh1.42bn less than the amount outlined in this year's budget, reflecting an effort to improve efficiency and save money across government departments.

Next year's slimmer budget represents "continuing efforts to raise the efficiency of government spending through increasing productivity and improving economic and social returns", the Dubai Government Media Office said in a statement, citing the Department of Finance.

The Supreme Fiscal Committee of Dubai this year asked departments to trim outlays by 20 to 25 per cent by 2013.

As spending has decreased over the past few years, so has the Dubai Government's deficit.

Next year's projected deficit is smaller than this year's spending gap of Dh3.77bn. The budget deficit last year was Dh6bn. Government budget deficits must be filled either by borrowing money or tapping other resources such as asset sales or wealth funds.

Next year's deficit amounted to about 0.6 per cent of Dubai's estimated GDP, the government statement said, adding that it was "in line with international financial guidelines that state that the gap should not exceed 3 per cent of the GDP".

"This is further confirmation that the Government is continuing to follow a rational expansionary fiscal policy as directed by the Supreme Committee of Fiscal Policy in the Emirate," the statement said.

Despite the spending cuts, Dubai's budget outlines large outlays on infrastructure, transport and economic development, which together take up 41 per cent of total expenditure. About Dh5.9bn has been earmarked for completion of infrastructure alone.

This was "in accordance with the plans laid out to effectively contribute to raising economic growth rates and stimulating domestic and foreign investments", the government statement said.

A further 29 per cent of spending was allocated towards social development, including health, education, housing and culture.

The hope is that rationalising spending and investing further in infrastructure will reap long-term rewards for the Government and help it to pay down debts using income from operations.

The budget was made under directives that "emphasised the emirate's seriousness in dealing with its borrowing, specifically debt that was issued to support the general budget and that was used in developing the infrastructure in the past, through servicing such debt from operational income", the government statement said.

Dubai and its government-linked companies must repay or refinance about $15bn of debt next year, according to analysts' estimates. The Government has said it does not intend to restructure any more debt, however, after finalising new terms this year on $24.9bn of debt at the state-owned conglomerate Dubai World.

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